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Cincinnati Bell goes private, sold to investor group for $2.9 billion

I-Team estimate: Bosses got $37M at closing
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Posted at 9:32 AM, Sep 07, 2021
and last updated 2021-09-07 19:49:19-04

CINCINNATI — An acquisitions group has bought Cincinnati Bell, Inc. in an all-cash transaction valued at roughly $2.9 billion, the telecommunications giant announced Tuesday morning.

With the acquisition by Australia-based Macquarie Infrastructure Partners, Cincinnati Bell gains access to new capital that will accelerate the expansion of its fiber-optic cable network in Cincinnati.

Cincinnati Bell executives and directors also gained access to capital with the transaction. An I-Team analysis shows 16 people will split $37 million from the sale of stock and "Change in Control" payments, also known as "Golden Parachute" perks, because the sale of companies often trigger accelerated vesting of stock options and other incentive payments.

“Our partnership with (Macquarie) is tremendous news for Cincinnati Bell’s 4,700 employees, our customers, and the communities we serve,” CEO Leigh Fox said in a press release. The new owner "has deep telecommunications expertise and a strong track record of investing in capital-intensive businesses."

The all-cash deal — which also included acquiring debt — was approved by shareholders in May 2020, according to a news release.

“Cincinnati Bell provides the communities they serve with vital network connectivity, and we’re looking forward to supporting their expansion plans to bring fiber throughout their market," said Anton Moldon, senior managing director with Macquarie Asset Management.

In an interview with the I-Team, Fox said the company will dramatically expand its fiber-optic network so it can reach 20,000 new homes per month, which is about the same amount of homes it added in all of last year.

He expects the company to add up to 50 jobs in Greater Cincinnati by year's end. And he vowed to continue Cincinnati Bell's civic contributions in the future.

"We donate millions of dollars every year to organizations that are focused on creating education, health care, employment and economic development opportunities," Fox said in a pre-recorded message about the deal, on the company's website. "Our employees annually volunteer thousands of hours to nonprofits throughout our various regions. None of this will change."

The deal is not without skeptics.

"It’s very easy to say you’re going to be a good corporate citizen. It’s much harder to hold a privately held company accountable for that," said Rosanna Landis Weaver, program manager for As You Sow, a Berkely Calif.-based nonprofit that promotes social change via corporate reform.

Weaver has tracked executive compensation trends since the early 1990s. She criticized Cincinnati Bell's pay plan because she thinks it "incentivized" Fox to sell the company.

"The most recent award Mr. Fox received in 2019 is worth now, I believe, close to double what it was worth on the day it was granted," Weaver said. "What did he do that made his work worth twice what it was estimated at two years ago?"

The I-Team calculated the value of all shares sold by officers and directors in the Macquarie transaction. In addition to shares acquired over the life of their employment by the company, the I-Team counted stock options, restricted shares and other incentive payments that "became fully vested and was canceled and converted into the right to receive a lump-sum amount in cash" when the sale closed, according to an 8-K filing with the SEC on Tuesday.

Here's a summary of the proceeds:

  • CEO Leigh Fox received $14.1 million.
  • Ten Cincinnati Bell directors received a combined $10.8 million.
  • Chief Operating Officer Thomas Simpson received $3.7 million.
  • General Counsel Christopher Wilson received $3.5 million.
  • Chief Financial Officer Andrew Kaiser received $3.1 million.
  • Chief Culture Officer Christi Cornette received $1.7 million.

Fox said the I-Team's estimate is "incredibly high," because information disclosed in the proxy does not match the actual payments derived from matching employment contracts to each executive's incentive awards.

"I’ve seen the numbers before and they’re just wrong," Fox said. "I wish I could tell you what the right numbers were."

Weaver said the I-Team's estimates are an accurate reflection of what's disclosed in the company's regulatory filings.

"What we have to go with is what’s disclosed," she said. "And we can tell by what’s disclosed that he’s going to make a lot of money with this transaction."